France

14/11/2013 - Improving France’s competitiveness is essential to boost the economic growth needed to create jobs and allow citizens and businesses to develop their full potential, according to a new OECD report.

France : Redresser la competitivité identifies a number of weaknesses in the economy where reforms should be a priority. A key focus is the need to ensure that the country’s education system and professional training infrastructure provide people with the right skills to succeed in a globalised economy.

The general level of education in France has progressed strongly in recent decades but the gap between the performance of good and weak students remains large, making the French education system one of the most unequal among OECD countries. The impact of socio-economic background on student performance is also one of the highest among the countries surveyed.

The report recommends assigning the most effective teachers to the weakest schools. Professional training is highly costly, not best adapted to needs and should be reviewed. The budget dedicated to professional training is around € 32 billion, equal to almost half of the total expenditure on unemployment insurance. The OECD recommends better targeting and the implementation of a system of vouchers to reach the most in need.

The report says product market regulation is stricter than the average in advanced economies, particularly in network industries and in the retail sector, where the margins imposed are among the highest in OECD countries. Competition restrictions also weigh on activity in the area of services to business.

OECD Secretary–General Angel Gurría said reforms are needed both to tackle inequality and support growth: “The government and social partners have made progress but must now be more ambitious in their aims, so that they correspond to a vision of society which is committed to all its citizens, including the most vulnerable.” (read the full speech in French).

The report, which Mr Gurría presented to French President François Hollande last week, points to a number of other key areas where the OECD recommends action to support productivity and competitiveness:

Reinforce research and innovation, an area that the report says is weak and imbalanced in France. Research and development, particularly among small and medium-sized companies, are insufficient and links between private and public research tenuous. Reforms over recent years are, however, beginning to bear fruit, but must be pursued, reinforced and evaluated.

Improve public sector efficiency. Reduce the regulatory burden, simplify the way decentralised authorities are organised and rationalise the overlapping «millefeuille » of agencies, says the report. An approach to public service based on performance needs to be developed.

Reform taxes. France’s relatively high levels of labour taxation and minimum wages undermine the employability of low-skilled workers .The numerous tax distortions and exemptions need to be rationalised. The report welcomes the Crédit d’impôt pour la compétitivité et l’emploi, which will lower labour costs and help increase exports and employment.

Reform the labour market. High unemployment among youths and the over 55s combined with the problem of long-term joblessness are major challenges. The OECD recommends aid being targeted to hire and train under-qualified youths and older workers for the skills that will be needed now and in the future and reducing the dualism between temporary and indefinite contracts by reforming job protection rules. The OECD welcomes the government’s “emplois d’avenir” programme to help young people gain their first job.

Improve the way the housing market functions. The report argues that the rise in property prices undermines France’s export performance as it attracts capital and labour resources away from more productive sectors of the economy. Reforms, including in the area of taxation, are needed to reduce distortions in the housing market.